"in policy terms, being Keynesian reflects a belief that the stimulus created a net improvement in the level of economic activity - or more importantly perhaps, in the rate of unemployment - compared with what would have prevailed had there been no stimulus."

It is possible to accept that "Keynesian" - or more accurately Pigouvian - stimuli will produce some second-best stimulus whilst also recognizing that Keynes misdirected attention away from the first-best solution: tackling the intermediary market failure at source (S is surrendered to banks who can decide to leave I to twist in the breeze). If this discretion is a non-negotiable constraint (or only tackled through the "socialisation of investment"), then it is not surprising that second best solutions have serious adverse consequences.    

Is there any causal relationship between this appeasement of "the markets" and the fact that macroeconomics was constructed by traders (Keynes' "swindle the investing public" joke (?), Fisher cheerleading for the 1929 bull market, Samuelson ...).  Most academic communities hunt in packs and economists can share unfounded prejudices to keep the old tunes playing ("an AD curve can't be derived from ISLM but teach it anyway") - but in the interests of Myrdal-transparency should economists disclose any potential conflict of interest with respect to the tangled web of financial sector advocacy? 

RL          


----- Original Message -----
From: "Steve Kates" <[log in to unmask]>
To: [log in to unmask]
Sent: Monday, 5 December, 2011 3:23:51 PM
Subject: Re: [SHOE] Critics of Keynes and Keynesian Economics

In its own way, the sparse response to my original query has sort of confirmed my suspicions that there is not all that much in an anti-Keynesian way being written. I cannot tell whether this lack of response is because the question is uninteresting or because there really is no one whose views one could readily point to. 

Moreover, Alan Isaac wrote about the question that  

"I have no idea what this even means. Would an anti-Keynesian position be an ideological stance?  In which case, who cares?  Or would it be an empirical stance, so that e.g. physicists should say that Einstein had an 'anti-Newtonian' position? One might hope that economists would not be 'pro' or 'anti' past analyses but would simply grapple with the evidence the best they can." 

Yet I do think even he must know what my question means since the stimulus over the past two years has been termed Keynesian time and again. Being Keynesian in theoretical terms means accepting the notion of aggregate demand as a force independent of aggregate supply acting on the level of economic activity - AS-AD. IS-LM, C+I+G and that sort of thing. And in policy terms, being Keynesian reflects a belief that the stimulus created a net improvement in the level of economic activity - or more importantly perhaps, in the rate of unemployment - compared with what would have prevailed had there been no stimulus. 

I know that if you are an Austrian economist, then you would think there had been no value in the stimulus. But is there no one else? Are we really all Keynesian now unless we're Austrians? 



Dr Steven Kates
School of Economics, Finance
    and Marketing
RMIT University
Level 12 / 239 Bourke Street
Melbourne Vic 3000

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